Cross E Holdings Co., Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥4.58B
• Operating Income: ¥563M
• Net Income: ¥289M
• EPS: ¥155.45

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Cross E Holdings (231A0) delivered solid FY2025 Q4 results under JGAAP on a consolidated basis, with revenue of ¥4,582m (+6.2% YoY) and operating income of ¥563m (+15.2% YoY). Profitability strengthened, as evidenced by operating margin of 12.3% and net margin of 8.4%, reflecting improved cost control and operating leverage. Gross profit was ¥1,004m, implying a gross margin of 21.9%, and ordinary income of ¥566m was broadly in line with operating income, indicating limited non-operating distortions. Net income reached ¥385m (+18.5% YoY), and EPS was ¥155.45, suggesting a small share base and meaningful per-share earnings power. DuPont analysis shows ROE of 13.23%, driven by an 8.40% net margin, 1.167x asset turnover, and modest financial leverage of 1.35x. Balance sheet quality appears strong: total assets were ¥3,925m and equity ¥2,909m, implying an equity ratio around 74% (despite a reported 0.0% field, which appears to be undisclosed data rather than an actual zero). Liquidity is robust with a current ratio of 317% and working capital of ¥2,386m, providing ample cushion for operations and growth. Cash generation was healthy: operating cash flow of ¥406m slightly exceeded net income (OCF/NI 1.05), and free cash flow was ¥378m after modest investing outflows of ¥28m. Financing cash outflows of ¥119m likely reflect debt and/or lease repayments rather than dividends, given DPS is reported as zero. Depreciation and amortization were just ¥15m, underscoring an asset-light model and supporting cash conversion. Interest expense is reported as zero, and the debt-to-equity ratio (using total liabilities) is 0.42x, suggesting low financial risk and negligible interest burden. The effective tax burden inferred from disclosed numbers is roughly 31–32%, consistent with domestic statutory rates, despite a reported 0.0% field for the “effective tax rate.” Revenue growth outpaced costs, delivering operating leverage and margin expansion YoY. With strong liquidity, conservative leverage, and positive FCF, the company has capacity to reinvest and potentially revisit shareholder returns, subject to strategic priorities. Notably, several fields show as zero (equity ratio, cash, inventories, shares), which indicates non-disclosure/mapping limitations rather than actual zeros; conclusions are drawn from the available non-zero data.

Profitability Analysis

ROE_decomposition: ROE 13.23% = Net margin 8.40% × Asset turnover 1.167 × Financial leverage 1.35. Net margin expansion alongside steady turnover and modest leverage underpins double-digit ROE. margin_quality: Gross margin 21.9% on revenue of ¥4,582m and gross profit of ¥1,004m suggests disciplined cost of sales. Operating margin of 12.3% (¥563m) and net margin of 8.4% (¥385m) indicate effective SG&A control and limited non-operating noise (ordinary income ~ operating income). The implied tax rate (~31–32%) is consistent with typical levels, supporting the sustainability of net margin. operating_leverage: Operating income growth (+15.2% YoY) outpaced revenue growth (+6.2% YoY), evidencing positive operating leverage. Low D&A (¥15m) means earnings are driven primarily by core operations, but also reduces non-cash cushion during downturns. Continued scale benefits could support further margin gains, provided cost discipline persists.

Growth Assessment

revenue_sustainability: Top-line growth of 6.2% YoY appears organic and consistent with stable asset turnover (1.167x). Absence of inventory suggests a services or asset-light model, reducing working capital drag and supporting sustainable growth. profit_quality: Ordinary income (¥566m) closely tracks operating income (¥563m), indicating low reliance on non-operating gains. OCF/NI of 1.05 supports earnings quality. Minimal interest expense strengthens the linkage between operating performance and net profit. outlook: With operating leverage demonstrated and a strong liquidity position, the company is positioned to sustain mid-single-digit revenue growth with potential incremental margin expansion. Key sensitivities include wage inflation, project mix, and client demand cycles typical of service-oriented businesses.

Financial Health

liquidity: Current assets ¥3,485m vs current liabilities ¥1,099m yields a current ratio of 317% and working capital of ¥2,386m, indicating ample short-term coverage. Quick ratio equals current ratio due to unreported inventories; true quick ratio is likely slightly lower but still strong. solvency: Total liabilities ¥1,226m versus equity ¥2,909m imply leverage of ~0.42x (liabilities/equity). Financial leverage (assets/equity) is 1.35x. Interest expense is reported as zero, indicating negligible financing cost risk. capital_structure: Equity comprises roughly 74% of assets (implied equity ratio ≈ 2,909/3,925), despite a reported 0.0% placeholder. The conservative balance sheet provides flexibility for investment and return of capital.

Cash Flow Quality

earnings_quality: OCF of ¥406m vs NI of ¥385m (OCF/NI 1.05) indicates solid cash conversion and limited accrual build. Low D&A (¥15m) suggests limited non-cash inflation of earnings. FCF_analysis: Free cash flow of ¥378m (OCF ¥406m less investing CF of -¥28m assumed to approximate capex) demonstrates strong self-funding capacity. FCF margin approximates 8.2% of revenue. working_capital: Working capital increased to ¥2,386m; service-oriented operations (inventories unreported) likely concentrate in receivables and cash equivalents (cash reported as zero is likely undisclosed). Monitoring receivable days and contract liabilities is pertinent to sustain OCF/NI >1.0x.

Dividend Sustainability

payout_ratio_assessment: DPS is reported as ¥0.00 and payout ratio 0.0%, indicating retention of earnings. Given NI of ¥385m and robust liquidity, the capacity for dividends exists, but policy appears to prioritize reinvestment or balance sheet strength. FCF_coverage: With dividends at zero, conventional FCF coverage is not meaningful (reported 0.00x reflects denominator issues). If a dividend were initiated, FCF of ¥378m provides ample headroom relative to typical payout levels for similar profiles. policy_outlook: Absent explicit guidance, the conservative capital allocation (net repayments in financing CF) suggests a cautious approach. Any shift toward a dividend or buybacks would hinge on growth visibility and cash accumulation.

Risk Assessment

Business Risks:

• Demand cyclicality in core end-markets potentially affecting utilization and pricing.
• Wage inflation and hiring pressures impacting gross and operating margins.
• Client concentration risk typical of project-based or BPO/IT service models (not disclosed).
• Execution risk on scaling while maintaining service quality and margins.
• Regulatory or compliance changes affecting labor practices and contract terms in Japan.

Financial Risks:

• Working capital swings impacting OCF despite solid annual conversion.
• Potential hidden leverage via leases or payables given low reported interest expense.
• Data limitations on cash and inventories obscure short-term liquidity composition.
• Tax rate variability around ~31–32% affecting net margins.

Key Concerns:

• Multiple key fields reported as zero (equity ratio, cash, inventories, shares) indicate disclosure/mapping gaps; monitoring updated XBRL tags is necessary.
• Interest coverage ratio reported as 0.0x is not meaningful due to zero interest expense reporting.
• Sustainability of operating leverage if revenue growth slows below mid-single digits.

Investment Implications

Key Takeaways:

• Double-digit ROE (13.23%) supported by expanding margins and modest leverage.
• Healthy cash generation with OCF/NI at 1.05 and FCF of ¥378m.
• Robust liquidity (current ratio 317%) and conservative balance sheet (~74% implied equity ratio).
• Operating leverage evident as OP rose 15.2% vs revenue +6.2% YoY.
• Dividend currently absent; financial capacity exists but policy remains conservative.

Metrics to Watch:

• Revenue growth trajectory and booking/backlog indicators.
• Operating margin sustainability and SG&A efficiency.
• OCF/NI ratio trend and receivables days to validate cash conversion.
• Capital allocation signals in financing cash flows (debt/lease movements, potential buybacks/dividends).
• Effective tax rate normalization versus implied ~31–32%.

Relative Positioning: Within Japanese asset-light service peers, the company appears above-average on liquidity and ROE with low financial risk; margin profile is solid and improving, while scale remains modest.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis